Analysts see the consumer price index rising at a 2.4% annual pace this year
Economists are boosting their forecasts for Canadian inflation and unemployment as the war in Iran drives up oil prices and heightens global instability.
Analysts in a Bloomberg survey see the consumer price index rising at a 2.4 per cent annual pace this year, up from 2.2 per cent in last month’s survey. Unemployment is expected to average 6.7 per cent in 2026, compared with 6.5 per cent previously, while the economy is seen expanding 1.1 per cent, down from 1.2 per cent.
The combination of accelerating inflation, elevated unemployment and weak growth point to mounting stagflationary risks. Last week, Bank of Canada Governor Tiff Macklem called that situation a “dilemma” because both raising and lowering interest rates carry risks.
In the survey, the median expectation is for the central bank to hold borrowing costs steady throughout 2026, with hikes starting in the second quarter of 2027. That outlook is increasingly divergent from markets — traders in overnight swaps see at least 50 basis points of hikes by the bank’s October meeting.
Economists see investment rising 0.8 per cent in 2026, down from 1.3 per cent previously. The survey of 33 economists was conducted between March 20 and 25.
Officials have held the policy rate at 2.25 per cent since October of last year, including at their decision last week. Before oil prices jumped, the bank had been squarely focused on the structural damage posed by the U.S. tariff dispute, saying it believed rates were at about the right level to help the economy transition while keeping a lid on inflationary pressures.
On Thursday, Senior Deputy Governor Carolyn Rogers said the central bank needs to “guard against” higher petroleum costs spreading to other goods and services and becoming “ongoing, persistent inflation.”
At the same time, Macklem has said he’d look through the near-term spike in oil prices and has emphasized the downside risks facing the economy. In a dovish set of communications, Macklem also said the central bank “would be talking about lower rates” if growth continued to deteriorate — absent the upside risk of higher energy costs.
The Bank of Canada next sets rates on April 29.
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